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Foreclosure:
What is It? and How to Avoid it |
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Copyright (c) 2008 Troy Foote
To understand the foreclosure process one must know what it is first.
So what is the definition of foreclosure? Simply put, the foreclosure
process as applied to residential mortgage loans is a bank or other
secured creditor selling or repossessing a parcel of real property
(immovable property) after the owner has failed to comply with an
agreement between the lender and borrower called a "mortgage" or "deed
of trust".
Within the United States and many other countries, several types of
foreclosure exist. Two of them - namely, by judicial sale and by power
of sale - are widely used, but other modes of foreclosure are also
possible in a few states.
The process of foreclosure can be rapid or lengthy and varies from
state to state. Other options such as refinancing, alternate financing,
temporary arrangements with the lender, or even bankruptcy may present
homeowners with ways to avoid foreclosure.
The number of households in foreclosure increased 79 percent in 2007,
and that number is increasing for 2008! So how does the foreclosure
process end? Well it can end in one of four ways:
1.The borrower/owner reinstates the loan by paying off the default
amount during the grace period.
2.The borrower/owner sells the property to a third party during the
pre-foreclosure period The sale allows the borrower/owner to pay off
the loan and avoid having a foreclosure on his or her credit history.
3. A third party buys the property at a public auction at the end of
the pre-foreclosure period.
4. The lender can take ownership either through an agreement with the
borrower/owner during pre-foreclosure, via a short sale foreclosure or
by buying back the property at the public auction.
Remember that understanding foreclosures is the first step for
homeowners to stop foreclosure. As long as real estate prices, which
are pretty much dictated by real estate buyers, continue to decline,
there will be increased numbers of defaults and foreclosures.
Few choose to go into foreclosure voluntarily. It's often an
unpredictable result from one of the following: Laid-off, fired or quit
job. Inability to continue working due to medical conditions. Excessive
debt and mounting bill obligations. Squabbles with co-owner, divorce or
job transfer to another state.
So how do you avoid foreclosure?
The best way to avoid foreclosure is to prevent the filing of a Notice
of Default. That is why it is better for you to call your lender before
falling behind on your payments, because lenders are often reluctant to
work out repayment schedules after foreclosure proceedings have been
commenced. You will be given a certain time period to bring the
payments current, pay the costs of filing the foreclosure and stop the
foreclosure.
No one expects to lose their house to foreclosure, but by understanding
the foreclosure process and what may lead up to it, you can be in a
better position to recognize and address potential problems that may
impact your ability to make every mortgage payment on time.
Learn to recognize the warning signs of foreclosure. Know what early
steps you can take to avoid foreclosure. If you are in the midst of a
foreclosure, know the dos and don'ts. Know where to get help in dealing
with issues that could lead to foreclosure. The time to develop a
backup plan is not when things have gotten so bad that you are facing
foreclosure, but when things are going well and you can prepare for the
unexpected "what if's" that happen in life.
Nearly four out of ten sub prime ARM loans are a month or more late, or
in foreclosure. And sub prime ARMs account for 39% of the loans that
fell into foreclosure during the quarter. Prime fixed-rate loans, which
are considered very low risk, have also seen sharp increases in their
delinquency and foreclosure rates, although they are performing far
better than the riskier loans on the market.
There are 431,000 prime loans in foreclosure. This marks the sixth
straight quarter in which a record percentage of loans went into
foreclosure. Nearly half of the homes in foreclosure are concentrated
in six states. Those four states have nearly 400,000 homes in
foreclosure, or a third of the nationwide total. Ohio has about 61,000
homes in foreclosure, while Michigan has about 54,000. The rate of
homes going into foreclosure in Ohio and Michigan was narrowly lower
than it was in the fourth quarter, and 18 other states also saw a
decline in that rate.
Both foreclosures and deficiency judgments could seriously affect your
ability to qualify for credit in the future. So you should avoid
foreclosure if at all possible.
Article Source: http://
www.articlesbase.com/finance-articles/foreclosure-what-is-it-and-
how-to-avoid-it-520707.html About the Author
If you are facing foreclosure than you need to click here to
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